Lifting Africa from a mineral 'curse'
The US and Europe are moving towards rules that would require their oil and mining industries to reveal all payments to foreign governments. Resource-rich but poor Africa will benefit from such transparency.
One of the world’s great paradoxes is that Africa is abundant with minerals, such as cobalt, diamonds, and oil, and yet the average African’s income has barely budged in decades. More than half of the continent’s 1 billion people live on less than a dollar a day.
Where does all that mineral wealth go? Most of it is secretly divided up between greedy local elites tied to government and the foreign companies that extract and export the minerals. These deals help explain why nearly half of the world’s most corrupt countries are in Africa.
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For 10 years, an effort that was begun by former British Prime Minister Tony Blair has tried to end this “paradox of plenty.” It aims to shed light on the flow of money from foreign firms to mineral-rich states around the world.
A special focus is on Africa, which ranks first or second in seven vital minerals, such as platinum. Its mineral exports are worth six times more than all foreign aid to the continent.
The idea is that citizens can demand accountability from their leaders if they know where foreign payments, such as taxes and royalties, actually go. Bribery is more easily spotted. Potentially, fewer violent conflicts will engulf nations such as Congo over the issue of extracting natural resources.
The effort, known as the Extractive Industries Transparency Initiative, has so far been mostly voluntary and includes only a fraction of countries. While it has made progress in places such as Nigeria and Ghana, the EITI is largely failing. That has pushed Europe and the United States to move toward a mandatory rule that their oil, gas, and mining companies must disclose payments made to foreign governments.
The West has long tried to improve public governance in Africa, such as tying foreign aid to policy reforms, especially ones that lessen corruption. Will this new effort work?
The extractive industry in the US and Europe is fighting the move toward mandatory disclosure, arguing that it is difficult to define a mineral “project” or its geographic boundaries. The companies also claim that China and other countries won’t follow suit, thus winning contracts over their Western competition.
The rules are being drawn up, separately, by the US Securities and Exchange Commission and the European Commission. (The US effort comes out of a provision in the 2010 Dodd-Frank financial reform law.) The fact that the two bodies are comparing notes will help provide a unified stand in setting a high moral bar for the world.
Despite the potential economic losses, trade and business can only grow if more dealings are honest and open. And properly managed, mineral wealth in places like Africa can lift billions out of poverty. Right now, studies show corruption in mineral-rich states only adds to poverty and conflict – or what is called the “resource curse.”
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Transparency and accountability in the mineral industry can only be valuable if a country has private watchdog groups, including a free media, to track the money. The World Bank and other aid sources can help build up such groups at the same time as the West changes its disclosure rules for mineral deals.
Companies in the West have come to accept their countries’ antibribery laws. They should welcome an effort to extend such anticorruption behavior to Africa and other resource-rich countries.